Budget preparation might seem like a boring task for most but it remains to be a crucial part of strengthening your finances. It is also a necessary step when you decide to let go of your full-time job for a freelancing career. There is no doubt that part-time jobs can help pay the bills but it takes on a different dimension when you start to solely rely on it for your finances.
There are a lot of reasons why people would choose to make this move. For some, they can simply be following their dreams and passion. They are at a point where they do believe they are stuck in a dead-end job and want to do something they really love. Case in point, Entrepreneur.com recently shared that 35% of the country’s workforce are freelancers.
If you are planning to make the jump from a full-time job to part time or freelancing, here are some budget and financial considerations to look into. These aim to help you make that transition as easily as possible.
Do ample research
Much like with any big decisions you will do in life, it is imperative that you put in enough research before jumping in with both feet. In the case of your employment, switching from full-time to freelance would no doubt affect your main source of income. As you transition, you need to prepare yourself for the new phase in your life.
It is a good idea to try and know as much as you can with freelancing. One idea is to talk to as many people as you can who have made the similar jump. This is because there are a lot of things computer research might not tell you. It would be great to hear factual experiences straight from people who are freelancing their way through life.
This approach can help you with your budget preparation. It is because you are able to gather as much information as you can with the new lifestyle you are looking into. The more detailed research and information you have on hand, the more informed decisions you can make. This helps you be a little more prepared for the changes that are about to happen.
Bring up your reserve funds
Even with a full-time or regular daytime job, you need your reserve funds to help you manage unexpected financial challenges. Even more so now that you are planning to switch to a freelance career. There is no question that the income for most people starting up with this part time job could be irregular.
This is one of the biggest challenges freelancers face especially with budget preparation. Income is irregular at best. There would be good months and bad months where income barely trickles into your budget. This means putting together a budget would be a little bit harder to accomplish. Forbes.com even shares that this safety net supersedes wealth building.
This fact further underscores the importance of having a good amount saved up for your emergency and rainy day fund. This is because having an inconsistent income will further complicate any emergencies that come your way. Having enough in your reserves could put some cushion and order in your budget.
Have your side gig set before giving up your full-time job
Would you jump on the plane know knowing where it is headed and not have any plans once you get its destination? Or would you sell your house now without any plans of where you will be staying in the net few weeks? You would probably answer no to both scenarios. This is because before you make any major decisions, you need to know where it will take you.
The same with your current career move, you wouldn’t want to clock in for the last time from your regular job without any direction in your freelancing career. With this in mind, it is best to have a definite action plan on how you would get started. It is even a lot easier if you have started already so you do not have any gaps in your income stream.
One way to do this is to start looking at income positive hobbies and go from there. If you love photography, arts & crafts, or event management, you can try them out on weekends first while holding onto a regular job. Once you get your feet wet and have an idea how to turn it into a regular thing, then you make the switch. That is a lot easier compared to quitting your job now and at the same time trying to figure out how to start with freelancing.
Budget preparation includes your retirement savings
Your retirement savings should constantly remain as a financial target for you year on year. This is because time is something that you can never take back. You will come to a point where you need to stop working and start to rely on whatever savings you have. The idea with retirement is to start as early as you can to retire as early as you can.
What makes this a little bit tricky is the fact that you are transitioning from a regular job to a part time one. This means that if you have a 401(k) set up by your employer in your regular work, you might have to do it on your own when you start to freelance. What is even more challenging is that you might lose any matching incentive from your employer which is basically free money for you.
One way to manage this is to be diligent in setting aside an amount for your retirement every month. You might need to work your way backward from your target retirement year and the amount that you need by then. You then have a target that you need to aim for and it gives you an idea how much you need every year or even every month to reach that goal.
Manage any impulsive buying habits
Budget preparation is a lot of work and you need to be able to stay on top of it every single day. However, there are instances that unaccounted expenses seem to find their way into your finances due to a lot of factors. One possible culprit whenever this happens is an impulsive buying behavior.
That flashing red sale sign in your favorite store or that online ad that seems to follow you regardless of the site you visit might be to blame. However, before you start pointing fingers on those marketing tactics, you need to assess your behavior first. Learn to control your emotions and not react to sales and discounts flashing in front of you.
Budget preparation is no walk in the park that is why it is crucial that you get around to doing it and doing it wisely. If you are thinking about jumping to a part time job and giving up full-time employment then you need to work on your finances. It would be a lot different and more challenging but the rewards could be great as well. If you follow your passion, then you could really end up doing what you love and feel as if you are not even working at all.